Notes to the financial statements | Note 2.2

The financial statements have been prepared under the assumption that Telkom SA SOC Ltd, representing Telkom Group and Telkom Company, operates on a going concern basis, which assumes the Group and Company will be able to discharge its liabilities as they fall due. In confirming the validity of the going concern basis of preparation, the Group has considered the following specific factors:

The Group incurred a loss after tax of R9 971 million (Company: R9 744 million), resulting in a 479.0% or R12 602 million decrease (Company: 302.4% or R14 558 million decrease) compared to the same period in the comparative financial year. The loss largely arose as a result of the following once-off, non-recurring charges:

• An impairment of assets charge in respect of the Group’s cash-generating units, namely Openserve and Telkom Consumer, of R13 236 million (Company: R6 129 million) with a related tax impact of R3 465 million (Company: R1 594 million). The impairment charge is a non-cash item and it will not impact EBITDA; and
• Voluntary early retirement and voluntary severance package costs of R1 065 million with a related tax impact of R277 million (Company: R420 million with a related tax impact of R109 million).

Solvency

• The annual financial statements, which have been prepared based on the going concern basis, indicate that the Group is solvent, with a net shareholders’ equity of R24 161 million (Company: R23 094 million);
• On 31 March 2023, the Group was in a net non-current asset position of R24 757 million and a net current liability position of R596 million (Company: net non-current asset position of R27 244 million and a net current liability position of R4 150 million);
• Since April 2022, the Group has increased its utilisation of committed facilities which form part of short-term borrowings. These facilities have largely been utilised to finance the purchase of spectrum and funding liquidity requirements of the business. Telkom is in the process of concluding long-term facilities that will be used to repay the short-term debt, increase headroom on committed facilities and reduce the amount of interest-bearing debt classified as current; and
• The Group still meets its financial covenants:

Liquidity

• The Group continuously monitors the short- and long-term liquidity needs, taking into consideration the cash balances, cash generated from operations as well as available borrowing facilities;
• The Group continues to generate positive cash flows from core business activities, evidenced by the positive cash generated from operating activities of R5 126 million on 31 March 2023, while the Company generated R4 072 million cash flow from operating activities. However, the cash flow from customers has slightly declined and management is putting measures in place to respond by introducing new products, closely monitoring collections, and introducing cost-cutting strategies, such as voluntary severance packages;
• The Group has sufficient liquidity facilities with R2 837 million in undrawn borrowing facilities and Company has sufficient liquidity facilities with R2 520 million in undrawn borrowing facilities; and
• The Group has cash and cash equivalents of R3 469 million and the Company has cash and cash equivalents of R1 807 million.

Based on these factors, management has a reasonable expectation that the Group has, and will have, adequate resources to continue in operational existence for the foreseeable future.